High Definition Television (HDTV) is quite an example of an international topic that has far reaching effects on the world wide electronics marketplace. HDTV is not simply a new standard for color televisions; it is in fact a doorway to becoming the world leader in setting the standards for; computer screens, laptop flat panel displays, medical imaging displays, automobile interactive displays and of course high definition wide screens. HDTV is as much about sound quality improvements as it is about clarity of the visual screen. However the quest for leadership in the HDTV market has become a saga of near successes, failures and potential winners. The stakes are tremendous. Even if we only concentrate on the television market the expected revenues are in the billions. Today there are an estimated 600 million TV sets in the world. With so much at risk it is not surprising that the interest of many multinational corporations and governments set their sights on capturing the lead in this emerging technological race. The alarming fact is that this race has been going on for more than 30 years.
The consumer electronics industry entered into the 90s eagerly waiting for a new growth stimulus. U.S. annual sales in 1992 for consumer electronics were 33 billion, which only trailed that of Japan (35 billion) and Europe (42 billion). In fact in 1991 television sales accounted for only 7 billion of new sales for the consumer electronics market. Historically, the industry has been driven by major innovations and life cycles of the radio, television, hi-fi and the VCR. The recent introductions of CDs, DAT and camcorders have not measured up to yesteryears major technological breakthroughs.
But first lets go back in history to understand some of what transpired in the early adoption of television standards. The 1920s saw the introduction of commercial radio broadcasting. This media form grew consistently right into the 40s when the first black and white television sets began appearing on the market. As quickly as black and white technology was introduced, engineers saw that color transmissions were the ultimate goal of this emerging visual medium. Zenith corporation introduced its first color television set into the U.S. market in 1961 and its price was comparable to that of a new automobile. Interestingly it took the color television 12 years after its introduction to begin outselling black and white sets. If HDTV projections are based upon similar projections it would correspond to an installed base of about $40 billion worldwide by the year 2000. Perhaps more important was the different selections of standards for achieving color broadcasting. Early on, Europe, lead by Britain, adopted the PAL standard while the U.S., in the late 50s, relied upon a committee to establish a new standard. The National Television Systems Committee agreed, in 1957, upon a standard that is still widely used today – apply referred to as the NTSC standard. These standards defined an analog broadcasting scheme that provided 525 lines of resolution for clarity and an aspect ration of 4 units wide by 3 units high. This aspect ration is why existing televisions don’t have the same wide screen appearance that you would normally see in movie theaters.
The first country to begin to realize the importance in HDTV technology leadership was Japan. The government in Japan viewed the development of the technology industry as a matter of national security. With strong backing from the Ministry of International Trade and Industry (MITI), Japan quickly became the early leader in HDTV technology. MITI’s role was unquestionably a major factor in establishing the encouragement of Japanese firms to concentrate their efforts in this new marketplace. MITI controlled the foreign exchange and had the ability of block both imports and foreign direct investment. This coupled with attractive loans, cooperative programs, extending a twenty six percent permanent tax credit and allowing accelerated depreciation of assets made it irresistible for firms to invest in HDTV. MITI’s desire for research and development lead to the creation of a team of researchers at the Nippon Hoso and Kyokai (NHK). The NHK, was the only national broadcaster in Japan after the war and it had the luxury of steady revenues from a monthly levy assessed on every television set in Japan. It wasn’t until the early 80s though that Japan first started transmitting HDTV signals based upon NHK’s creation of the MUSE decoding scheme. Given the trend that 50 percent of television screens purchased in Japan are 32 inches or longer the Ministry of Post and Telecommunications (MPT) projects that 40 percent of all Japanese households will own a HDTV set by the year 2000. This represents a market value of $9.6 billion. Unfortunately the global acceptance of MUSE HDTV is not as promising worldwide as some analysts have already dubbed this hybrid digital-analog system obsolete.
Europe naturally had great fear concerning MUSE HDTV. In 1984 when Japan demonstrated a means for transmitting HDTV, Europe felt vulnerable. HDTV was thought to be the key to dominating the world in consumer electronics and communications technology for the foreseeable future. What ended up being the first blow to Japan was the unilateral rejection of Japan’s standard by Europe even though the U.S. was leaning in favor of adopting it. Europe felt that by establishing a new standard, Japan would have to re-develop their technology while Europe played catch up.
Unfortunately what clouded their vision in Europe was that they just began launching its Direct Broadcasting System (DBS) and felt it was prudent to tie HDTV standards with this newly introduced medium. They modified their DBS analog technology to be expanded for increased demands for HDTV and called it Multiple Analog Component (MAC) HDTV. This rejection tactic against Japan did work in the short run, however similar to Japan their recommend standard never received global support and quickly fell apart with the introduction by American firms of a digital HDTV standard.
The United States did not start out wanting to formalize the HDTV industrial policies. Attention was heightened when the International Trade Administration conducted a study that found Japan had more than doubled the number of U.S. electronic patents since the mid 70s. The U.S. was in fact an early adopter of Japan’s MUSE standard, however in the early 90s, the marching orders came from the Bush administration to position the U.S. as the premier choice for a long term HDTV standard.
In 1993 the FCC made the key decision for an all digital HDTV standard. The problem was that Zenith, AT&T, Massachusetts Institute of Technology and A.T.R.C. all had quality aspects to offer and resulted in 4 serious contenders vying for 1 standard. The FCC then made a recommendation to form a “Grand Alliance” which evolved to include AT&T, General Instrument Corporation, Massachusetts Institute of Technology, Zenith Electronics Corporation, Philips Consumer Electronics, the David Sarnoff Research Center and Thompson Consumer Electronics. The alliance took the best features of the 4 presented systems and developed them into the Vestigal Sideband (VSB) HDTV standard. Now the aspect ratio was established at 16 units wide by 9 units high and contains 1080 lines of resolution. Additionally motion standards were based upon a MPEG2 syntax that will permit it to easily interact with computer multimedia applications directly. High quality Audio would be supported by Dolby AC-3 digital audio compression.
Finally, in 1996, the FCC adopted the VSB HDTV as the new broadcast standard and began requiring commercial broadcasts to start in late 1998. The FCC has aggressively targeted 2006 as the date for a full conversion to digital broadcasting and a gradual phase out of the current NTSC broadcasts.
Who made the right decisions and where do these decisions leave us today? First we must analyze the cultures involved. Industrial policy played an increasingly large part in how the evolution of HDTV transpired. Japan’s MITI actively targets industries with high growth potential while simultaneously establishing the necessary roadblocks from foreign players. The U.S. on the other hand acts like they abhor the government’s involvement in setting industrial policy. Even today, the U.S. trade policy still labors under the assumption that Japan systematically discriminates against foreign market entrants. MITI hides these barriers under tax policies, competition policies and even land use polices. Not everyone concurs with this belief though. Some foreign corporations have successfully entered the Japanese market. These culturally aware corporations found a way to play by Japan’s rules and still achieve a competitive success.
MITI’s role in encouraging Japanese firms to develop HDTV technology looks from some eyes to be a total disaster. True billions of dollars are now lost on an analog system that has no global appeal, however, today Japan is currently the only country where HDTV transmissions are common place reaching more than 30 millions viewers daily. But how much of a role did MITI actually play in the growth of HDTV is debatable. Some would argue that Japan’s industrial policy suggests that they are responsible for much of what happened to Japan’s success in the 80s. Upon closer look that may not be the case.
Japan as a whole was experiencing continuing growth and rapid advancement because it was predominately playing technological catch up with the West. It is far easier to grow and improve productivity quickly when you are adopting and adapting technologies invented elsewhere than it is when you have to develop new technologies yourself. Additionally, Japan was aided by a business friendly policy environment of low taxes and low government spending. One can conclude then that Japan’s rapid ascent was more a tribute to private sector innovation and market forces rather than some MITI masterminded interventionist industrial policy. This, however, leaves little solace to the taxpayers who, like in Europe, are left paying for the many billions lost in the quest for leadership in HDTV technology.
Today many U.S. policymakers no longer fear that Japan is about to overwhelm us economically. That misplaced fear bred panic, and led to the serious consideration and occasional implementation of policies that were fundamentally inconsistent with the world trading order. Most of these fear-based implementations were eliminated before irreversible damage was done and today the picture is quite different. The U.S. has new and quite different fears about Japan. While the U.S. has virtually eliminated the calls for import restrictions a broad-ranged criticism has been building that Japan is not bearing the burden of an economic leader. Japan’s problems, compounded by the Asian crisis, have fueled new fears that a financial collapse by Japan could precipitate a global economic downturn.
Perhaps the U.S. has the correct approach regarding Industrial Policy. By not having the Government actively dictate where firms invest their precious resources they in effect allow for competitive forces to dictate Research and Development policies. In contrast, when reviewing Japan’s history one must factor in the value or hindrance of government’s involvement. Japan’s governmental bodies have arguably had a lack of foresight who have opted for reacting rather than anticipating. This may have succeeded in the past, but the speed of today’s fast evolving technologies can not wait for traditional sluggish government responses to define policy. It appears that even today, MITI has difficulty in overcoming an inherent bias for micro managing regulation rather than looking at overall strategies.
Not only has this lead to Japan falling behind in certain high tech developments, Japan now has had to turn its attention to domestic problems. With publicity surrounding such domestic inadequacies as the fact that only 15 percent of Japanese homes are connected to sewers , Japan has been forced to do a bit of backpedaling and refocusing on domestic issues. Even so, the trade conflicts between the U.S. and Japan will continue. This is inevitable given the commercial stakes involved and the continued perception of Japan as an unfairly closed market. These markets, much like the HDTV market, are probably better off without the added pressures from government’s involvement.
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